The paid-up capital of the banks in Ghana went up by 38.4% (GHS9.26 billion) in October 2019, from GHS6.69 billion in October 2018.

According to the November 2019 Banking Sector Report released on 30 December 2019, the industry’s shareholder funds also went up by 24.7% in October 2019 (GHS17.34 billion) from GHS13.90 billion in October 2018.

This is due to the pick-up in the banks’ reserves following improved industry profitability and the strong growth in paid-up capital.

Growth in other liabilities (other than deposits, borrowings and shareholders’ funds) increased by 11.2% (GHS7.75 billion) during the period under review compared with 9.1% a year earlier.

The industry’s balance sheet performance also remained strong during the first 10 months of 2019 supported by strong growth in assets and deposits reflecting sustained confidence in the banking sector post-reforms and recapitalisation.

Asset and Liability Structure

Broadly, the asset and liability structure of the banks’ balance sheet remains unchanged, the report noted.

Investments dominated the asset mix followed by loans and advances. The share of investments (bills and securities) in banks’ assets, however, declined marginally from 40.3% to 39.2% during the period under review, while that of net advances inched up from 28.7% to 30.1%.

Credit Risk

The Banking Sector report emphasised that asset quality of the banking industry broadly improved, evidenced by a decline in the NPL ratio during the review period.

Intensified loan recovery, write-offs and credit risk management were noted as some of the on-going measures expected to sustain the gains made in the industry to prevent deterioration and safeguard the quality of the new capital.

Asset Quality

The industry’s asset quality, according to the report, broadly improved during the period under review due to the implementation of loan write-offs and intensified recoveries.

The stock of the industry’s NPLs edged up marginally to GHS7.19 billion in October 2019 from GHS7.14 billion a year ago. The marginal increase in the stock of NPLs in October 2019 vis-à-vis the higher growth in total loans contributed to the lower NPL ratio of 17.3% from 20.1% for the same comparative period last year. 

The industry’s NPL ratio adjusted for the fully provisioned loss loan category improved to 8.1% in October 2019 from 11.4% in October 2018. This points to the fact that the industry’s stock of NPLs could be reduced further with implementation of the loan write-off policy, intensified loan recoveries, and stronger credit risk management practices.

Expectedly, the private sector’s share of the banking industry’s NPLs increased to 97.7% in October 2019 from 95.5% in October 2018, while the share of NPLs contributed by the public sector declined to 2.3% from 4.5% over the same period.

This shows that the pick-up in the banking sector’s loans to the public sector has not been associated with deterioration in the quality of loans to that sector.

Overall, the report said the performance of the banking industry during the review period shows that a stronger banking sector has emerged, with improved solvency, liquidity and profitability.

Further, asset quality is improving and banks’ resilience to shocks has been strengthened.

The key financial soundness indicators remained positive throughout 2019 as banks adhered to sound banking practices following the reforms.